Economics Bible
Chapter 1 TEN PRINCIPLES OF ECONOMICS
1. Scarcity.
Scarcity means that society has limited resources and therefore cannot produce all the goods and services people wish to have.
Scarcity ( Management of Society’s Resources.
Economics is the study of how society manages its scarce resources. a. How people make decisions, a. People Face Tradeoffs, b. The Cost of Something is What You Give Up to Get It, c. Rational People Think at the Margin, d. People Respond to Incentives. b. How people interact, a. Trade Can Make Everyone Better Off, b. Markets Are Usually a Good Way to Organize Economic Activity, c. Governments Can Sometimes Improve Market Outcomes. c. How the economy as a whole works. a. A Country’s Standard of Living Depends on Its Ability to Produce Goods and Services, b. Prices Rise When the Government Prints Too Much Money, c. Society Faces a Short-Run Tradeoff between Inflation and Unemployment
2. Tradeoffs of our lives.
No free lunch ( To get one thing that we like, we usually have to give up another thing that we like ( Tradeoff.
a. For every hour studying Econs, I give up an hour studying Maths. b. A family to spend income on holidays or to save as retirement funds. c. Guns vs. Butter ( National Defense vs. Consumer Goods. d. Modern Society ( Clean Environment vs. High Level of Income. e. Efficiency vs. Equity ( Size of Pie vs. How the Pie is Divided. i. Efficiency: the property of society getting the most it can from its scarce resources. ii. Equity: the property distributing economic prosperity fairly among the members of society. Implication of Tax: achieving greater equity but lower efficiency.
Understand Tradeoff ( Make Good Decision.
3. What is Opportunity Cost? Example.
Make Decision ( Comparing Cost and Benefit
Example:
1. Scarcity.
Scarcity means that society has limited resources and therefore cannot produce all the goods and services people wish to have.
Scarcity ( Management of Society’s Resources.
Economics is the study of how society manages its scarce resources. a. How people make decisions, a. People Face Tradeoffs, b. The Cost of Something is What You Give Up to Get It, c. Rational People Think at the Margin, d. People Respond to Incentives. b. How people interact, a. Trade Can Make Everyone Better Off, b. Markets Are Usually a Good Way to Organize Economic Activity, c. Governments Can Sometimes Improve Market Outcomes. c. How the economy as a whole works. a. A Country’s Standard of Living Depends on Its Ability to Produce Goods and Services, b. Prices Rise When the Government Prints Too Much Money, c. Society Faces a Short-Run Tradeoff between Inflation and Unemployment
2. Tradeoffs of our lives.
No free lunch ( To get one thing that we like, we usually have to give up another thing that we like ( Tradeoff.
a. For every hour studying Econs, I give up an hour studying Maths. b. A family to spend income on holidays or to save as retirement funds. c. Guns vs. Butter ( National Defense vs. Consumer Goods. d. Modern Society ( Clean Environment vs. High Level of Income. e. Efficiency vs. Equity ( Size of Pie vs. How the Pie is Divided. i. Efficiency: the property of society getting the most it can from its scarce resources. ii. Equity: the property distributing economic prosperity fairly among the members of society. Implication of Tax: achieving greater equity but lower efficiency.
Understand Tradeoff ( Make Good Decision.
3. What is Opportunity Cost? Example.
Make Decision ( Comparing Cost and Benefit
Example: